Q2 2026 Compliance Newsletter

Executive Summary

The second quarter of 2026 continued to demonstrate Bermuda's commitment to maintaining a robust and internationally respected AML/ATF and sanctions framework. Regulatory developments during the quarter reinforced supervisory expectations surrounding sanctions compliance, beneficial ownership transparency, suspicious activity reporting, and governance oversight.

A notable theme emerging across both Bermuda and international enforcement activity is the increasing focus on evidencing decision-making. Regulators and enforcement authorities are placing significant emphasis on whether firms can demonstrate not only that controls exist, but that they operate effectively and consistently in practice.

For Boards, MLROs, Compliance Officers and regulated firms, the message remains clear:

A policy is evidence of intent. Effective implementation is evidence of compliance.

Regulatory Watch | Q2 2026

Key Developments & Supervisory Signals

The Bermuda Monetary Authority continued to signal a more active and outcomes-focused supervisory posture during Q2 2026. Key themes emerging from BMA publications, notices and enforcement activity include governance accountability, fitness and propriety, regulatory reporting discipline, insurance-sector resilience, and financial crime risk linked to unauthorized entities and false claims of Bermuda licensing.

1. Enforcement Action – Prohibition Order Against Joakim Samuelsson

One of the most significant enforcement developments was the BMA’s prohibition order against Joakim Samuelsson, a former director, officer and controller of Custodian Life Limited.

The BMA prohibited Mr Samuelsson, for an indefinite period, from acting as a controller, director, officer, chief executive, senior executive or associate of any entity registered under the Insurance Act 1978.

The BMA’s published findings identified serious and sustained failures relating to:

• Improper trading practices;

• Weak protection of policyholder assets;

• Inaccurate or misleading statutory and public disclosures;

• Failures to cooperate with an investigator appointed under the Insurance Act;

• Outsourcing and records-control failures;

• Failures to cooperate with joint provisional liquidators; and

• Failure to comply with Court orders.

Supervisory Signal

This enforcement action demonstrates the BMA’s willingness to take strong action where senior individuals are found to lack probity, competence, diligence, soundness of judgment or fitness and propriety.

For regulated firms, the practical message is clear: governance failures, poor records, weak outsourcing controls and lack of regulatory cooperation can have serious consequences for both the entity and responsible individuals.

2. Custodian Life – Governance, Records and Regulatory Cooperation

The Custodian Life matter remains a useful case study in regulatory risk. Public reporting indicates that the insurer had been in provisional liquidation since November 2023, with concerns around restructuring, access to records, cooperation and policyholder protection.

The BMA’s enforcement materials make clear that the Authority viewed the conduct at issue as directly linked to longstanding regulatory breaches and the resulting liquidation.

Supervisory Signal

Boards and senior management should ensure that:

• Regulatory records are complete, accurate and accessible;

• Outsourcing arrangements do not impair regulatory oversight;

• Senior management cooperates fully with regulators, investigators and court-appointed officers;

• Governance structures provide meaningful challenge and control; and

• Customer or policyholder protection remains central to decision-making.

3. Warning List and Public Warnings – Financial Crime Risk Indicator

The BMA continues to use public warnings and its Warning List to alert the public and regulated sector to unauthorised entities and fraudulent activity.

During 2026, the BMA issued a public warning concerning Coinmint Bermuda Limited, stating that the Authority had not issued a license to the entity and that no such companies were recorded on the Bermuda Register of Companies under the relevant names.

Supervisory Signal

The Warning List should be treated as an active financial crime intelligence source. Firms should not rely solely on client representations, websites, social media, email signatures or marketing materials when assessing whether an entity is licensed or incorporated in Bermuda.

Practical Control Expectations

Firms should:

• Verify claimed BMA licensing status against official BMA registers;

• Screen customers, counterparties and introducers against the Warning List;

• Treat false claims of Bermuda licensing as a potential fraud indicator;

• Document escalation decisions where suspicious regulatory claims are identified; and

• Ensure staff are trained to identify clone firms and false regulatory representations.

4. Regulatory Reporting and Insurance Sector Monitoring

In May 2026, the BMA notified insurance groups and commercial insurers that quarterly financial return templates for the quarter ended 31 March 2026 were available and requested relevant insurers to include details of exposure to the ongoing Iran war / Middle East crisis and latest loss estimates.

This demonstrates the BMA’s continued use of regulatory reporting to monitor geopolitical, market and exposure-related risks.

Supervisory Signal

Regulatory reporting should be treated as a core governance and risk management process, not as an administrative filing exercise.

Boards and senior management should ensure that:

• Regulatory filings are complete, accurate and timely;

• Exposure data is supported by appropriate internal analysis;

• Emerging geopolitical risks are considered within risk frameworks; and

• Material exposures are escalated to the Board or relevant committee.

5. 2026 Business Plan – Responsible Innovation, Resilience and MER Readiness

The BMA’s 2026 Business Plan reinforces the Authority’s continued focus on responsible innovation, prudent oversight, stakeholder engagement and Bermuda’s readiness for its next Mutual Evaluation process.

The Business Plan also reflects increasing attention to technology, AI, transparency, accountability and ethical governance.

Supervisory Signal

The BMA’s strategic direction indicates that firms should expect continued scrutiny of:

• Governance and risk culture;

• Operational resilience;

• Outsourcing and third-party risk management;

• AML/ATF effectiveness;

• Digital innovation and technology governance; and

• Readiness for evolving international standards.

6. Q1 2026 Regulatory Update – AML/ATF and High-Risk Jurisdictions

The BMA’s Q1 2026 Regulatory Update referenced the AML/ATF Ministerial Advisory 1/2026, which communicates the requirement to apply enhanced due diligence for high-risk jurisdictions and reinforces the need for firms to maintain current AML/ATF controls.

Supervisory Signal

Firms should ensure that AML/ATF frameworks are aligned with current advisories and that higher-risk jurisdiction exposure is reflected in:

• Business Risk Assessments;

• Customer Risk Assessments;

• Enhanced Due Diligence procedures;

• Ongoing monitoring frequencies; and

• Board or compliance committee reporting.

Pillars Insight

The BMA’s Q2 activity reflects a clear supervisory direction: regulatory compliance is being assessed through conduct, evidence and outcomes. Firms that maintain strong governance structures, accurate records, responsive regulatory engagement and demonstrable risk-based controls will be better positioned during supervisory reviews, enforcement scrutiny and independent audits.

Legislative & Policy Developments

Beneficial Ownership Transparency

The ongoing implementation of Bermuda's beneficial ownership reforms continues to highlight:

• The importance of accurate beneficial ownership identification

• Alignment between internal records and statutory registers

• Enhanced expectations surrounding ownership verification

Compliance Implications

Firms should review:

• Beneficial ownership procedures

• Corporate structure verification processes

• Ongoing monitoring arrangements

Sector Supervisory Focus

Real Estate Sector

The Superintendent of Real Estate continues to focus on:

• Independent AML audits

• Source of funds verification

• Enhanced due diligence

• Sanctions compliance

• Training effectiveness

The continued use of statistical returns demonstrates an increasing emphasis on measurable supervisory data.

Barristers & Accountants AML/ATF Board

New Guidance Notes and Enhanced Supervisory Expectations

Updated Guidance Notes Signal Increasing Supervisory Maturity

During Q2 2026, the Barristers & Accountants AML/ATF Board issued updated AML/ATF Guidance Notes for regulated professional firms, representing one of the most significant supervisory developments for the legal and accounting sectors in recent years.

The revised Guidance Notes reflect evolving FATF standards, recent legislative developments, and supervisory observations arising from inspections, independent audits and industry engagement. The updates place particular emphasis on evidencing compliance through a documented and demonstrable risk-based approach rather than relying solely on the existence of policies and procedures.

The revised Guidance Notes reinforce the expectation that firms maintain robust Business Risk Assessments, Customer Risk Assessments, beneficial ownership verification procedures, sanctions controls, suspicious activity reporting frameworks and ongoing monitoring arrangements that are tailored to the firm's actual risk exposure.

Enhanced Independent Audit Requirements

One of the most significant developments is the Board's revised guidance concerning independent AML/ATF audits.

The updated requirements provide greater clarity regarding:

• The purpose and scope of independent AML/ATF audits;

• Auditor independence requirements;

• The qualifications, experience and competency expected of auditors;

• The distinction between independent assurance activities and compliance consulting services;

• Reporting standards and expectations for audit findings and recommendations.

The revised guidance reflects a clear supervisory expectation that independent audits should provide meaningful assurance regarding the effectiveness of AML/ATF controls rather than simply confirming the existence of policies and procedures.

Firms should therefore consider whether their existing audit arrangements remain aligned with the Board's revised expectations and whether upcoming audits are sufficiently robust to withstand supervisory scrutiny.

Real Estate Sector – Revised Customer Risk Assessment Expectations

The Guidance Notes also introduce a significant change to the treatment of customer risk within the Bermuda real estate sector.

The Board has indicated that Bermuda real estate transactions should now be considered to present a minimum Medium Risk classification for AML/ATF purposes.

This represents an important shift from historic approaches where certain domestic transactions may have been assessed as presenting a lower level of risk based solely upon customer residency, transaction value or local connections.

The revised position recognizes that real estate transactions remain vulnerable to:

• Money laundering through property acquisition and disposal;

• Complex ownership and control structures;

• Beneficial ownership opacity;

• Use of third parties and intermediaries;

• Cross-border financial flows; and

• The integration of criminal proceeds into the legitimate economy.

Practical Implications for Real Estate Firms

Real estate brokers and salespersons should review:

• Customer Risk Assessment methodologies;

• Existing client risk classifications;

• Enhanced Due Diligence triggers;

• Ongoing monitoring procedures;

• Source of funds and source of wealth requirements;

• Business Risk Assessments; and

• Independent audit programmes.

Firms should not assume that domestic transactions automatically represent lower risk and should ensure that risk ratings are supported by documented rationale and evidence.

Continued Focus on Suspicious Activity Reporting

The updated Guidance Notes continue to emphasize the importance of effective suspicious activity reporting procedures and clear escalation pathways.

The Board expects firms to maintain documented rationale supporting decisions to file, or not file, Suspicious Activity Reports and to ensure that all relevant personnel understand their reporting obligations.

Particular emphasis is placed on:

• Internal reporting procedures;

• Escalation to the MLRO;

• Documentation supporting decisions;

• Ongoing monitoring following identification of unusual activity; and

• Awareness of tipping-off risks.

Beneficial Ownership and Transparency

The Board has also reinforced expectations regarding the identification and verification of ultimate beneficial ownership, particularly where legal entities, trusts, partnerships or complex ownership structures are involved.

Professional firms are expected to demonstrate that beneficial ownership information has been independently verified and remains subject to ongoing review throughout the business relationship.

Training and Competency Expectations

The revised Guidance Notes continue to emphasize that AML/ATF training should be:

• Risk-based;

• Relevant to the firm's activities;

• Tailored to employee responsibilities; and

• Updated to reflect emerging risks and regulatory developments.

Training programmes should address:

• Money laundering typologies;

• Terrorist financing risks;

• Sanctions compliance;

• Counter-proliferation financing;

• Suspicious activity reporting obligations; and

• Recent enforcement and regulatory developments.

Pillars Insight

The updated Guidance Notes reflect a broader trend across Bermuda's regulatory landscape. Regulators are increasingly focused on the quality and effectiveness of compliance controls, the competency of those responsible for implementing them, and the ability of firms to evidence risk-based decision-making.

The most significant message emerging from the revised Guidance Notes is that firms must be able to demonstrate not only what decisions were made, but why those decisions were made, what information was considered, and how those decisions continue to be monitored over time.

Regulatory Enforcement Tracker

Financial Crime Sentencing Trends

Recent sentencing decisions continue to demonstrate that courts globally are imposing significant custodial sentences and financial penalties in major money laundering, corruption and sanctions-related cases. These cases provide useful insight into the types of conduct that regulators and law enforcement agencies continue to prioritize.

1MDB – Former Malaysian Prime Minister Najib Razak

In December 2025, former Malaysian Prime Minister Najib Razak was sentenced to an additional 15 years' imprisonment after being convicted on four counts of abuse of power and 21 counts of money laundering linked to the 1MDB sovereign wealth fund scandal.

The case remains one of the largest financial crime scandals in modern history, involving the alleged misappropriation of approximately US$4.5 billion through a complex network of shell companies, offshore structures, financial institutions and intermediaries. In addition to the custodial sentence, the Court imposed substantial financial penalties and asset recovery measures.

Compliance Lessons

The 1MDB scandal continues to highlight recurring AML control failures, including:

• Inadequate verification of source of wealth;

• Failure to identify beneficial ownership and control;

• Over-reliance on client explanations without independent corroboration;

• Weak escalation of unusual transaction patterns;

• Failure to adequately scrutinise politically exposed persons (PEPs); and

• Insufficient challenge by financial institutions and professional intermediaries.

Bermuda Relevance

For Bermuda firms, the case serves as a reminder that:

• PEP relationships require enhanced scrutiny;

• Source of wealth assessments must be evidence-based;

• Complex structures should not be accepted at face value; and

• Large or unusual transactions require documented challenge and verification.

Financial Crime as an Integrity Offence

A common theme emerging from sentencing decisions globally is that courts increasingly view money laundering as an offence against the integrity of the financial system rather than merely a property crime.

Sentencing remarks increasingly emphasize:

• The role of professional facilitators;

• The misuse of legitimate financial institutions;

• The damage caused to public confidence in financial markets; and

• The need for deterrence.

Pillars Insight

The most significant lesson from recent sentencing decisions is that many major money laundering schemes do not fail because controls are absent. They fail because warning signs are identified but not challenged, documented or escalated.

International Financial Crime Developments

Halkbank – Sanctions Evasion, Front Companies and Trade-Based Laundering

One of the most significant sanctions and money laundering cases globally remains the long-running prosecution of Türkiye's state-owned lender, Halkbank.

US prosecutors alleged that Halkbank participated in a scheme designed to help Iran evade US sanctions by moving billions of dollars of restricted funds through the international financial system. The allegations included the use of:

• Front companies;

• False documentation;

• Gold transactions;

• Trade-based money laundering techniques; and

• Layered international payment flows.

In October 2025, the US Supreme Court declined to hear Halkbank's appeal, allowing the prosecution to continue. Although the matter was ultimately resolved through a deferred prosecution agreement in 2026, the case remains one of the most significant examples of the convergence between sanctions evasion and money laundering.

Compliance Lessons

The allegations demonstrate how sanctions evasion frequently relies upon:

• Complex ownership structures;

• Use of intermediaries and nominee entities;

• Trade transactions with no apparent commercial rationale;

• Misrepresentation of underlying goods and services; and

• Movement of funds through multiple jurisdictions.

Bermuda Relevance

Bermuda firms should ensure that sanctions compliance extends beyond simple name screening and includes:

• Beneficial ownership analysis;

• Assessment of transaction purpose and economic rationale;

• Identification of intermediary relationships; and

• Monitoring for sanctions-evasion typologies.

Asset Recovery Remains a Global Priority

Recent developments in the 1MDB matter also demonstrate the continuing international focus on asset recovery. Courts and enforcement agencies continue to pursue luxury real estate, investment assets, bank accounts and other property linked to the alleged proceeds of crime.

In May 2026, a US court ordered the forfeiture of a luxury Manhattan property connected to the 1MDB fraud, together with associated rental income, as part of broader efforts to recover assets linked to the scheme. The US Department of Justice has now recovered more than US$1 billion connected to the scandal.

Compliance Lessons

Asset recovery cases continue to highlight the importance of:

• Accurate beneficial ownership information;

• Robust source of funds verification;

• Ongoing monitoring of high-risk relationships;

• Documentation capable of reconstructing historic transactions; and

• Effective suspicious activity reporting procedures.

Emerging Risk – Digital Assets and Sanctions Evasion

International regulators and law enforcement agencies continue to identify the use of digital assets, stablecoins and decentralized finance structures in sanctions-evasion schemes.

While traditional sanctions screening remains important, regulators are increasingly focused on whether firms understand how new technologies may be used to obscure ownership, transfer value across borders and circumvent financial controls.

Pillars Insight

The common thread running through recent international enforcement actions is that criminals continue to exploit complexity. Whether through offshore structures, trade transactions, nominee arrangements, shell companies or digital assets, the objective remains the same: conceal ownership, disguise the source of funds and frustrate detection.

The most effective compliance programmes are those that look beyond the documentation presented and seek to understand the true purpose, ownership and economic rationale of a transaction or relationship.

FATF & Global Standards Update

Recent FATF commentary continues to focus on:

• Counter-proliferation financing

• Beneficial ownership transparency

• Asset recovery effectiveness

• International cooperation

Implication for Bermuda Firms

Expect continued alignment of Bermuda legislation and supervisory expectations with evolving FATF standards.

Pillars Practical Compliance Insight

What Regulators Actually Test

Across inspections, independent audits and enforcement actions, regulators consistently focus on:

a. Evidence

Can the firm demonstrate what it did?

b. Escalation

Was unusual activity appropriately escalated?

c. Documentation

Is there a clear rationale for decisions?

d. Governance

Did senior management and the Board receive sufficient information?

Looking Ahead – Q3 2026

Firms should prioritize:

• Sanctions effectiveness reviews

• Counter-proliferation financing assessments

• Beneficial ownership verification exercises

• Training refreshes

• Independent testing of AML/ATF controls

How The Pillars Consultancy Can Assist

The Pillars Consultancy Limited provides:

• Independent AML/ATF audits

• AML remediation programmes

• Sanctions reviews

• Business Risk Assessments

• Customer Risk Assessment frameworks

• Board and MLRO training

• Compliance Officer and MLRO support services

Disclaimer

This newsletter is provided for general information purposes only and does not constitute legal, regulatory or professional advice. Organizations should obtain advice tailored to their specific circumstances, sector and regulatory obligations.